Video games industry bodies have reacted with anger to the government's announcement that it will scrap plans to introduce tax breaks for the UK games industry.

In the emergency budget, the chancellor called Labour's pre-election plans to offer tax cuts to video games companies "poorly targeted". Instead, he is introducing generic measures to stimulate growth throughout the business sector, including cuts to corporation tax and national insurance.

The news has come as a blow to UK games developers who are having to compete against countries that offer significant tax advantages to their rivals. In Quebec, for example, the government pays a third of the salary costs of development staff and offers tax holidays for foreign investors. The incentives have prompted publishers such as Square Enix, Electronic Arts, Ubisoft and Warner Bros set up studios in Montreal, often downscaling British investment in the process. Australia, South Korea and the US offer similar incentives.